Credit Bureau Dispute

Credit Bureau Dispute
Credit Bureau Dispute

A credit report is a compilation of your personal information which helps creditors, insurers and employers make vital decisions. It includes your name, address, your financial history, information on your bank accounts, whether you pay your bills on time, any past court case information, history of arrests, and any bankruptcy proceedings.

Why is a credit report important?

A credit report is a pretty comprehensive record of your financial and personal life. It represents your ability to be a good borrower and your creditworthiness. A bank decides whether to give you a loan or not using the credit report. An insurance policy premium is decided by looking at the credit report. Credit card applications and cell phone contracts are approved after going through your credit report. Vital day-to-day services that you seek depend on your credit score.

What is credit score?

The credit score is a score that is assigned to every individual based on their credit report. The higher the score, the better it is for you. A high credit score signifies good creditworthiness. You can avail most of the financial services that you seek with a high credit score. Your interest rates will also be very reasonable if your credit score if good because you are a relatively “low risk” borrower who has a solid track record of making payments on time and being financially stable.
On the other hand, if your credit score is not good, you face a lot of challenges. A low credit score may be the reason for the rejection of a credit card application or a cell phone plan. If you go to a financial institution and apply for a mortgage, you may not get one. Or even if you do get approved, you will be paying a much higher interest rate than someone with a good credit score. This difference in interest payment can be quite significant in the long run, especially if you add up all the extra outflow over a 20-plus year period.

Who compiles credit reports?

Credit reports are compiled by companies called credit bureaus. There are 3 major bureaus in the US that almost every financial institution uses to access your credit reports. They are Experian, Equifax, and TransUnion. These companies are in the business of credit reports, so normally they are quite professional. They may use third party information companies that provide them the data to compile credit reports.

Ways a credit report can be impacted

Thus, one thing is quite clear: your credit report and credit score should be the best that it can be. You have to follow all the best practices and habits to ensure that you get favorable treatment every time you seek an essential financial service. There are many different items on a credit report. These items get affected by many different actions and events. A lot of the actions are something that you can control. But, there are many other actions or events over which you have no control over at all.

Some particular situations that will negatively impact your credit score are:

  • Late Payments – One of the big reasons for bad credit reports is late payment of bills. Credit card bills, utility bills, phone bills, all should be paid on time. Any payment due for 30 days or more can easily show up on your credit report and pull down your credit score.
  • Debt: The kind of debt your hold and the amount of debt are both critical for your credit report. Unsecured debts like payday loans or credit card debt are not looked upon very favorably. A home loan that is backed with a real physical asset, an auto loan (backed with a vehicle), or an education loan is not such a negative.
  • Credit Card Spending: Spending too close to your credit limit can negatively affect your credit score. Either request for an increase on your limit or spend significantly below your credit card limit.
  • Bankruptcy – Bankruptcy is a major financial event in a person’s life. It is a big negative event. Such a negative event will certainly affect your credit score. The impact on your credit score will remain for at least 7 to 10 years. In order to recover from bankruptcy and pull up your credit score, you will have to work patiently towards the recovery.
  • Foreclosure – A foreclosure occurs when you fail to make the installment payments on your mortgage. A default on your home loan will prompt the lender to either recover the money or take possession of your home. As you can tell, it is a major long-term negative for your credit report. Your credit score will go down because of a foreclosure. Patience and hard work will be needed to recover.
  • Lawsuits – A court judgment where you are ordered to pay can negatively affect your credit score.
  • Repossession – Repossession is the process where the asset that has been put up as collateral gets repossessed because of default. Simply losing the asset does not end your worries because the unpaid debt amount can still have negative impacts.
  • Tax Lien – Not paying off the tax amount leads to an unpaid tax lien. This can be pretty bad for your credit report and it can affect your credit score for up to 7 years.
  • Charge-Off – When a debt has been deemed to be non-recoverable by the lender, a charge-off takes place. In a charge-off, the debt is simply written off the lender’s books and the non-performing asset (loan) is sold at a discount to a debt collector. Debt collectors are pretty aggressive in their recovery efforts. The result is a hit on your credit score in addition to other trouble.
  • Medical Expense: Sometimes, life threatening diseases or a long illness can make you incur an unusually high amount of expenses. This can put you in financial difficulties and you could end up not making payments that you are supposed to.
  • Unexpected Passing Away: A death in the family is always a difficult moment. Financially, it becomes very difficult if that person is the sole income earner or the biggest income earner of the household. That can lead to financial strain and a hit on your credit report.

Most of these above-mentioned situations are within your control, except the last two. There are some other scenarios below which can also affect your credit score without you knowing:

  • Identity theft: A thief manages to get hold of your personal information and your social security number. The thief uses that information to fraudulently open a bank account in your name or gets a credit card and makes purchases without paying the bills. The bills become outstanding and your credit report takes the hit.
  • Inaccurate reporting: Sometimes the credit bureau compiling the credit report makes a mistake. Either there is an error on their part, or there is an error at the end of the information provider who supplies the data to the bureau. That can also lead to a wrong and unfairly negative credit report.

Disputing inaccuracies on your report

If you find that the information on your credit report is not accurate and is wrongfully penalizing you, then you can dispute that particular item on your report. In fact, you can dispute multiple items on the report that you think are not correct.

The first step in disputing your report is to first order a copy of your report from all the three bureaus. You are entitled to one free report a year. The 3 credit bureaus mentioned above are required by law to provide you with one copy annually for free upon your request. Once you have the report, read it thoroughly and go through every single item. Mark all items which are not accurate.

Then, write a letter to the credit bureau clearly listing out all items that you marked. The worst mistake that you can make with an inaccurate credit report is to just sit and do nothing hoping that the negative items will go away after a while. Taking action is absolutely essential if you want to get your credit report fixed. You will be encouraged to know that many people successfully dispute such error with credit bureaus every single year. As long as you follow due process, you have a great chance of setting things right.

Writing to the bureau

Before you write a certified letter to credit bureaus, it is important to understand what the letter looks like and what exactly should be written in the letter. If you follow the best practices and guidelines, then you can increase your chances of successfully disputing negative items on your credit report. Following are some pointers that will help you write clear, professional, and successful dispute letters to credit bureaus:

  • On the letter, it is very important to include your full name, current contact information, and correct mailing address. These details will ensure that the bureau communicates with the right person without wasting much time.
  • Finding out errors on something as important as a credit report is disturbing. Your emotions may be running high. But try not to let those emotions affect your communication. Use a neutral and professional tone in all your correspondence. Stay calm and list out all the things that you feel are not true. You are not obligated to give proof as to why you are disputing a particular item. It is the job of the bureau to give you an explanation as to why they included a particular item on the credit report. Let them give the explanations.
  • Another best practice is to hand-write the letter rather than type it on the computer. Few people hand-write anything these days, and doing so will add a personal touch. It demonstrates that a real person is disputing the credit report and that person is serious about it. After all, you have to invest time and effort to write the letter. Credit bureaus get hundreds of letters every day and by handwriting your letter, you will have genuine content rather than a copy-paste job. Credit bureaus will spot the difference because they are used to reading large volumes of dispute letters.
  • Although you are not required to send any proof or documentation as to why you think an item is incorrect, you can send some information if you wish. Always send a photocopy of any document that you consider attaching to the certified letter. Never send the original. You might need that for later, in the event of a legal proceeding.
  • Lastly, use the return receipt option or proof-of-delivery option when you mail the letter. You need proof that your communication was in fact received by the bureau. Otherwise, it is very easy for anyone to say that they never received any dispute notice from your end.

Dealing with identity theft

If you have been a victim of identity theft, then not only do you need to try and repair your credit and write to the bureaus, but you may also have to take additional measures to protect your personal information. You may have to work with a credit monitoring company and request a freeze on your credit files. Putting in a freeze will deter identity thieves to conduct any transaction on your name without your permission. A credit monitoring service will alert you every time a financial activity takes place in your name, such as the opening of a new bank account or the issuance of a new credit card. Spotting anything suspicious can allow you to take action before it is too late.

Where to mail the dispute letter?

TransUnion Dispute Letter Mailing Address
P. O. Box 1000
Chester, PA 19022
Experian Dispute Letter Mailing Address
2220 Ritchey
Santa Ana, CA 92705
Equifax Dispute Letter Mailing Address
P. O. Box 740241
Atlanta, GA 30374-0241

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